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STRATEGIC MANAGEMENT: Strategic Management can be defined as the set of decisions and actions resulting in formulation and implementation

of strategies designed to achieve the objectives of an organization. It involves taking decisions about products, location, and the organizations structure these determine the survival of the organization in the short or long term. IMPORTANCE OF STRATEGIC MANAGEMENT: Strategy refers to the plans made and actions taken to enable an organization fulfill its intended objectives. INTENDED STRATEGY: When we speak of strategy as plans for future, we refer to an intended strategy. REALIZED STRATEGY: When we speak of strategy as actions taken, we refer to a realized strategy. In both cases, we are considering the efforts directed towards fulfilling an organizations purpose. COMPONENTS OF STRATEGIC MANAGEMENT: Strategic planners should take into consideration different components of strategic management in finalizing their business strategy. A comprehensive understanding of these components helps in designing effective plans for the future of the organization. THESE COMPONENTS INCLUDE: 1. Vision. 2. Company Mission. 3. Company Profile. 4. External Environment. 5. Strategic Analysis & Choice. 6. Annual Objectives. 7. Long-term Objectives. 8. Grand Strategy. 9. Functional & Operational strategy. 10. Policies. 11. Institutionalization the Strategy. 12. Control & Evaluation. 1. VISION: The companys vision is a description of what the organization is trying to do and to become. It gives a view of an organizations future direction and course of business activity. Above all, vision is a powerful motivator and keeps an organization moving forward in the intended (future or planned) direction. 2. COMPANY MISSION: The mission of a company sets apart one company from other companies in the same area of business. The mission identifies the scope of the companys operations, describes the companys product, market and technological areas of thrust, and reflects the values and priorities of its strategic decision makers.

3. COMPANY PROFILE: The profile of a company depicts the quantity & quality of the companys financial, human & physical resources. The profile also assesses the strengths & weaknesses of the companys management & organizational structure. It also analyses the companys past performance & traditional concerns in the context of the companys current capabilities, in an attempt to identify its future capabilities. 4. EXTERNAL ENVIRONMENT: The external environment consists of all the conditions and forces that affect an organizations strategic options and define its competitive situation. The external environment consists of three interactive segments. They are the operating environment, the industry environment and the remote environment. 5. STRATEGIC ANALYSIS AND CHOICE: Strategic analysis enables a firm identify a range of possible attractive investment opportunities. Opportunities that are compatible with the companys mission are identified as desired opportunities. Further weeding out from the list of desired opportunities, results in the identification of potential options or strategic choices. 6. ANNUAL OBJECTIVES: These are the objectives that the firm seeks to achieve in one year. Annual or shortterm relate to the same areas of the business as do the long-term objectives. The major difference is that short-term objectives are more specific and are based on the long-term objectives. For instance, if the firms long-term objective is to cut manufacturing costs by 20% in the next 4 years, then the annual objective might be to reduce its manufacturing costs by 5% every year. Hence, achieving short-term or annual objectives is crucial to attaining the long-term objectives. 7. Long-term Objectives: Long-term objectives refer to those results that an organization seeks to achieve over a number of years. Such objectives are typically set in terms of profitability, return on investment, competitive position, technological leadership, productivity, employee relations, public responsibility and employee development. 8. GRAND STRATEGY: A Grand Strategy is a statement of means that indicates the methods to be used to achieve the companys objectives. The grand strategy provides the framework for the entire business of the firm. Grand strategies focus on market development, product development, innovation, horizontal integration, vertical integration, joint venture, strategic alliance, concentric diversification, conglomerate concentration. 9. FUNCTIONAL OR OPERATIONAL STRATEGY: The functional strategy is split into strategies for each business division or function. These strategies are referred to as business strategies. They are specific to the needs of each functional area and prescribe an integrated action plan for every function.

Operational strategies provide the means for achieving annual objectives. The company budget is coordinated with the needs of operating strategies to ensure specificity, practicality & accountability in the plans. 10. POLICIES: These are the guidelines given to managers and their subordinates as the framework to guide their thoughts, decisions, and actions while implementing the organizations strategy. Examples of company policies or standard operating procedures: The head office should authorize every purchase activity. The annual performance review of every employee should be undertaken on the individuals date of joining. 11. INSTITUTNIANALIZING HE STRATEGY: The annual objectives, functional strategies, and policies re valuable channels For communicating what needs to be done to implement the overall strategy. Implementation of strategy must be institutionalized, i.e. it must become part of the day-to-day activities of the company, if it is to be effectively implemented. Three organizational elements: structure, leadership, and culture help institutionalize a firms strategy. Structure of the organization can influence the strategy when a particular function holds control over senior management.

DEFINING VISION One definition of vision comes from Burt Nanus, a well-known expert on the subject. Nanus defines a vision as a realistic, credible, attractive future for [an] organization. Let's disect this definition:

Realistic: A vision must be based in reality to be meaningful for an organization. For example, if you're developing a vision for a computer software company that has fixed out a small niche in the market developing instructional software and has a 1.5 percent share of the computer software market, a vision to overtake Microsoft and dominate the software market is not realistic!

Credible: A vision must be believable to be relevant. To whom must a vision be credible? Most importantly, to the employees or members of the organization. If the members of the organization do not find the vision credible, it will not be meaningful or serve a useful purpose. One of the purposes of a vision is to inspire those in the organization to achieve a level of excellence, and to provide purpose and direction for the work of those employees. A vision which is not credible will accomplish neither of these ends.

Attractive: If a vision is going to inspire and motivate those in the organization, it must be attractive. People must want to be part of this future that's envision for the organization.

Future: A vision is not in the present, it is in the future. In this respect, the image of the leader gazing off into the distance to formulate a vision may not be a bad one. A vision is not where you are now; it's where you want to be in the future. (If you reach or attain a vision, and it's no longer in the future, but in the present, is it still a vision?)

DEVELOPING A VISION: 1. Understand the organization. To formulate a vision for an organization, you first must understand it. Essential questions to be answered include what its mission and purpose is, what value it provides to society, what the character of the industry is, what institutional framework the organization operates in, what the organization's position is within that framework, what it takes for the organization to succeed, who the critical stakeholders are, both inside and outside the organization, and What their interests and expectations are.

2. Conduct a vision audit. This step involves assessing the current direction and momentum of the organization. Key questions to be answered include: Does the organization have a clearly stated vision? What is the organization's current direction? Do the key leaders of the organization know where the organization is headed and agree on the direction? Do the organization's structures, processes, personnel, incentives, and information systems support the current direction?

3. Target the vision. This step involves starting to narrow in on a vision. Key questions: What are the boundaries or constraints to the vision? What must the vision accomplish? What critical issues must be addressed in the vision?

4. Set the vision context. This is where you look to the future, and where the process of formulating a vision gets difficult. Your vision is a desirable future for the organization. To craft that vision you first must think about what the organization's future environment might look like.

This doesn't mean you need to predict the future, only to make some informed estimates about what future environments might look like. First, categorize future developments in the environment which might affect your vision. Second, list your expectations for the future in each category. Third, determine which of these expectations is most likely to occur. And Fourth, assign a probability of occurrence to each expectation.

5. Develop future scenarios. This step follows directly from the fourth step. Having determined, as best you can, those expectations most likely to occur, and those with the most impact on your vision, combine those expectations into a few brief scenarios to include the range of possible futures you anticipate. The scenarios should represent, in the aggregate, the alternative "futures" the organization is likely to operate within. 6. Generate alternative visions. Just as there are several alternative futures for the environment, there are several directions the organization might take in the future. The purpose of this step is to generate visions reflecting those different directions. Do not evaluate your possible visions at this point, but use a relatively unconstrained approach. 7. Choose the final vision. Here's the decision point where you select the best possible vision for your organization. To do this, first look at the properties of a good vision, and what it takes for a vision to succeed, including consistency with the organization's culture and values. Next, compare the visions you've generated with the alternative scenarios, and determine which of the possible visions will apply to the broadest range of scenarios. The final vision should be the one which best meets the criteria of a good vision, is compatible with the organization's culture and values, and applies to a broad range of alternative scenarios (possible futures). MISSION STATEMENT The term mission is defined as the fundamental and enduring purpose of an organization that sets it apart from other organizations of similar nature. The mission statement is an enduring statement of purpose for an organization; it refers to the philosophy of the business and serves to build the image of the company in terms of activities currently pursued by the organization, and its future plans. This philosophy establishes the values, beliefs and guidelines for business plans and business operations. Mission statement comes in various forms but the most effective are those that are direct, precise and memorable. Most corporate mission statements are built around three main elements: Important Points: To build the image of the company in terms of currently activities & future plans. This philosophy establishes the values, beliefs, and guidelines for business plans and business operations. 1. History of the organization. 2. Distinct competencies of the organization. 3. The environment of the organization.

History of the organization: The critical characteristics and events of the past must be considered while formulating and developing a mission statement. Distinct competencies of the organization: The communication of key goals that reflect the distinct competencies of the organization where it offers an advantage over other organizations. The environment of the organization: The management should identify the opportunities provided and threats or challenges posed by the environment before formulating The characteristics of a good mission statement are: It differentiates the company its competitors. It is inspiring. It is relevant to all the stakeholders in the firm, not just shareholders and managers. It attempts to ensure that the organization behaves in the way that it promises it will by defining the purpose for which the firm exits. It seeks to clarify the purpose of the organization why it exists. FORMULATING A MISSION STATEMENT KEY ELEMENTS OF A MISSION STATEMENT: View of the Future: The anticipated regulatory, environment in which the company must compete. competitive and economic

Competitive Arenas: The business and geographic arenas where the company will compete. Sources of complementation Advantage: The skills that the company will develop to achieve its vision; a description of how the company intends to succeed. Fundamental Intentions: A statement of the role that company will seek to adopt; a description of what the company hopes to accomplish as means to gauge future success. As the business grows, the company may redefine its mission statement. The revised mission statement generally reflects the seem set of elements as the original. It will state: The basic type of product or service to be offered. The primary markets or customers groups to be served. The fundamental concern for survival through growth & profitability. The public image sought. The managerial philosophy of the firm. The firms self-concept.

STRATEGIC INTENT:

"Intent" is basically related to "intentions" that is "a plan to do something" is an intention So, here is you answer - "STRATEGIC INTENT" is - what an organization plans to strive for in future (long term), and it can be expressed in vague / broad terms as well as in specific terms

So, vision & mission of an organization expresses the strategic intent of the organization in broad terms .... and ... business definition, goals, objectives expresses the strategic intent of the organization in relatively specific terms.

Strategy:- A comprehensive plan to face the external environmental factors or forces.


Strategy, a word of military origin, refers to a plan of action designed to achieve a particular goal.

CRAFTING A STRATEGY
The task of crafting a strategy entail answering a series of hows: how to grow the business, how to please customers, how to outcompete rival, how to respond to changing market conditions, how to manage each functional piece of the business and envelop needed competencies and capabilities, how to achieve static and financial objectives. A COMPANYS STRATEGY - MAKING HIERARCHY It thus follows that a companys overall strategy is a collection of strategic initiatives and actions devised by managers and key employees up and down the whole organizational hierarchy. In diversified, multibusiness companies where the strategies of several different businesses have to be managed, the strategy-making task involves four distinct types or levels or strategy, each of which involves different facets of the companys overall strategy. CORPORATE STRATEGY: It consists of the kinds of initiatives the company uses to establish business positions in different industries, the approaches corporate executives pursue to boost the combined performance of the set of businesses the company has diversified into, and the means of capturing cross-business synergies and turning them into competitive advantage. Senior corporate executives normally have lead responsibility for devising corporate strategy and or choosing form among whatever recommended actions bubble up from the organization below. Major strategic decisions are usually reviewed and approved by the companys board of directors. BUSINESS STRATEGY: It concerns the actions and the approaches crafted to produce successful performance in one specific line of business. The business head has at least two other strategy-related roles.

Seeing that lower-level strategies are well conceived, consistent, and adequately matched to the overall business strategy, Getting major business-level strategic moves approved by corporate-level officers (and sometimes the BOD) and keeping them informed of emerging strategic issues. FUNCTIONAL AREA STRTEGIES WITH EACH BUSINESS: It concerns the actions, approaches, and practices to be employed in managing particular functions or business processes or key activities within a business. The primary role of a functional strategy is to support the companys overall business strategy and competitive advantage. For the overall business strategy to have maximum impact, businessmens marketing strategy, production strategy, finance strategy, customer service strategy, product development strategy, and human resource strategy should be compatible and mutually reinforcing rather than each serving its own narrower purposes. OPERATING STRATEGIES: It concern the relatively narrow strategic initiatives & approaches for managing key operating units (plants, distribution centers, geographic units) and specific operating activities with strategic significance (advertising companions, the management of specific brands, supply-chain related activities and Web site sales and operations. UNIT II EXTERNAL ENVIRONMENT An organizations business environment encompass both the external environment and the internal environment. An organization has to understand the external environment in order to operate effectively the marketplace. It should also be able to adapt itself to changing circumstances to service in the business. The external environment of a firm essentially includes the environment in respect of political, economic, social and technological factors. Porters industry analysis helps organizations to understand the various faces that operate and determine their future. External Environment: 1. Political Environment. 2. Economic Environment. 3. Social Environment. 4. Technological Environment. POLITICAL ENVIRONMENT: Political forces influence the legislations and government rules and regulations under which the firm operates. Every company faces political constraints in the form of antirust laws, fair trade decisions, tax programs, minimum usage legislation, pollutions and pricing policies, administrative activities and many other actions, aimed at protecting the consumers and the local environment. These laws, rules and regulations affect a companys profits. However, there are other political actions such a patent laws, government subsidies and product research grants that support business activities. Political activity also influences three organizational functions 1. The supplier function. 2. The customer function. 3. The competition function.

The supplier Function: The supplier function is influenced by political activity when any private business is dependent of government-owned resources and national stockpiles of agricultural products. Example: Baharati Cement. The Customer Function: As regards the customer function, government demand for products and services can create, enhance or eliminate many market opportunities. The Competitive Function: ECONOMIC ENVIRONMENT: Every market is unique and consumption patterns change as the wealth of consumers changes in various segments of the market. For strategic planning, certain crucial macroeconomic trends have to be taken into consideration. These would include prime interest rates, inflation rates and trends in the growth of the Gross National Product (GNP), the general availability of credit, the level of disposable income and the propensity to spend at the national and international levels.

SOCIAL ENVIRONMENT: The social environment is an important factor as changes in the values, beliefs, attitudes, opinions and lifestyles in society create potential opportunities for an organization. For a company to grow it is necessary to take advantage of societal changes. The cultural, demographic, religious, educational and ethnic conditional of individuals in society affects the social environment. TECHNOLOGICAL ENVIRONMENT: The technological environment comprises factors related to the materials and machines used in manufacturing goods and services. The cost of technology is an important consideration for a technology-intensive business. Similarly, the rate of change of technology influences the decisions in various organizations. The receptivity to new technology and its adoption by the public also has an impact on decisions made in an organization. Technological innovations determine how organizations compete and thrive in the marketplace. INDUSTRY LEVEL ANALYSIS The effective formulation of strategy needs a clear understanding of competition. Competition in an industry is determined not only by existing competitors but also by other market forces such as customers, suppliers, potential entrants, and the existence of substitute products. Understanding the level of competition is important because the level of profits depends to a large extent upon the level of competition. The need to study the underlying sources of competitive pressure is obvious. Understanding the sources of competition can help the firm to gauge its own strengths and weaknesses, and to perceive the trends in the industry so that it can position itself optimally for the best returns.

Michel E. Porter of the Harward Business School has developed a framework known as the Five forces Model to help managers to analyze the business environment, According to Porter, the five forces, namely, the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the rivalry among existing players, and the threat of substitute products, play a vital role in shaping the companys future. These five forces are shown: THREAT OF NEW ENTRANTS. New entrants to an industry bring in new capacity, and capture market share from the existing players. The result is more players and more competition. This situation can lead to price wars, which can result in falling returns. This decline in profitability becomes a problem for the new entrants too. This is why new entrants to an industry often take the acquisitions route.

THERE ARE SIX SUCH BARRIERS TO ENTER IN THE INDUSTRY: 1. ECONOMIES OF SCALE. Firms realize economies of scale as the output of manufacturing units increases. They manufacture goods at a lower average cost compared to other manufacturers with lower levels of output. Economies of scale create barriers in distribution, utilization of the sales force, and financing for the business. If we produce more production cost of the unit decreases. Optimization of use of resources. 2. PRODUCT DIFFERENTIATION. Firms differentiate their products by establishing brand identification and customer loyalty. Brand identification and customer loyalty can be built through advertising, customer service, product differences, or first mover advantage. Product differentiation thus forces the new entrant to spend huge amounts to overcome this cost disadvantage. In soft- drinks 3. CAPITAL REQUIREMENTS A firm needs capital not only for advertising and R&D, and but also for customer credit, inventories, and to absorb start-up losses. Huge capital requirements limit the number of players in industries such as computer manufacturing and mineral extraction. 4. COST DISADVANTAGES INDEPENDENT OF SIZE: Existing firms in an industry sometimes enjoy advantages that are not available to new entrants. These advantages spring from the effects of the learning curve and the experience curve. Similarly, proprietary technology, access to the best sources of raw-materials, assets purchased at lower prices, government subsidies and favorable locations can give competitive advantages to existing firms in an industry.

5. ACCESS TO DISTRIBUTION CHANNELS: The product of a new entrant must replace the products of existing firms and occupy shelf space. New entrant tries to ensure this replacement through price breaks, promotions, intense salesmanship or other means. However, if there are a limited number of distribution channels, it will be more difficult for the new entrant to gain selling space. This is because the existing players may have already entered into exclusive agreements to promote their products. To overcome this problem, the new entrant may be forced to create its own distribution channels. 6. GOVERNMENT POLICY: The government can use its discretion to influence the competition in an industry by imposing controls, mandating license requirements, and limiting access to raw materials. Trucking, railroads, liquor retailing are regulated industries. Pollution control requirements can increase the capital needed for the installation of sophisticated equipment. Standards for product testing, common in industries like food and health related products, can lead to substantial lead times and raise the capital cost of entry.

7. INTENSITY OF RIVALRY AMONG EXISTING COMPETITORS: Rivarly in an industry occurs when one or more firms make an effort to increase their market share. This can lead to price wars, advertising battles, launches of new products and increased customer services and warranties. THE BARGAINING POWER OF BUYERS: Customers are the ones who buy products from the firm. But they are not always the final users of the product. Porter says that buyers are powerful under the following circumstances: When the suppliers are many and the buyers are a few & large. When the buyers purchase in large quantities. When the suppliers industry depends on the buyers for a large percentage of its total orders. When the buyers can switch orders between supply companies at a low cost, thereby playing companies off against each other to force down prices. When it is economically feasible for the buyers to purchase the input from several companies at a time. When the buyers cam use the threat to provide for their own needs through vertical integration as a device for forcing down prices.

THE BARGAINING POWER OF SUPPLIERS: The bargaining power of suppliers determines the companys profitability when the suppliers are able to force the price that the buyer must pay for the product. Suppliers are powerful under the following circumstances. When the product that they sell has few substitutes and is important to the purchasing company or buyer.

When no single industry is a major customer for the suppliers. When products in the industry are differentiated to such an extent that they are not easily substitutable and it is costly for a buyer to switch from one supplier to another. To raise prices, the supplier can use the threat of vertically integrating forward into the industry and competing directly with the buying company. The buying companies cannot use the threat of vertically integrating backward and supplying their onw needs as a means to reduce input prices.

THE THREAT OF SUBSTITUTE PRODUCTS: Substitute products can match the needs of the customer in the same way as the original product. Coffee, tea and softdrinks, all serve the consumers need for refreshment. Due to the existence of substitutes such as tea and soft drinks, If coffee prices are hiked, customers have the option of switching over to tea or soft drinks, which are substitutes. A close substitute is a potential threat to the companys product. The existence of a susbstitute limits the price which can be charged for a product and therefore the profitability of the company.

INTERNAL ANALYSIS OF THE FIRM An internal analysis of the organization is the basis for studying business policy and strategy. For developing a successful strategy, a firm should have a realistic assessment of its internal resources and capabilities. An analysis of internal resources will reveal what the organization is capable of in terms of its own resources. ANALYZING DEPARTMENTS & FUNCTIONS: All organizations irrespective of their size, nature and scope of business must perform the functions of finance, production, marketing, human resoueces management and research & development. Managers should understand the interrelationships among these functions to formulate effective strategies. PRODUCTION/OPERATIONS/TECHINCAL The production strategies of small business units are different from those of large business units. STATEGIES FOR SMALL BUSINESS UNITS: Small business units undertake low initial investment in their plant, equipment and long-term advertising, because they compete in niche markets on price. The business units that adopt the nice-differentiation strategy compete on the basis of quality. Sometimes they opt for handcrafting processes, and produce according to the customers preferences. These units also make low investments in semi-variable and variable costs. STRATEGIES FOR LARGE BUSINESS UNITS: The major advantage of large business units is the reduction in cost per unit of output due to economies of scale. As a firm gains experience in producing a product, production costs can be systematically reduced. Three conditions are generally found in these units. They are Capital-labor susttitution: Substituting capital for labor and vice-versa.

Economies of Scale: Reductions in cost per unit of output as volume of out increases. Learning: The accumulation of a useful body of knowledge as a result of experience.

FINANCE & ACCOUNTING: Studying the financial situation of the company helps the analyst to understand the operation of the organization. Working capital needs give a clear idea of companys operations. The critical areas of functioning in terms of finance of any profit or nonprofit organization are: Scanning the business investments and allotting funds. Planning for securing and using funds. Controlling expenditure. Reporting all transactions and results to appropriate parties. Financial analysis of the firm involves the use of ratios such as the liquidity ratio, leverage ratio, activity ratio, and profitability ratio.